Russia’s energy minister said Tuesday that his country has agreed with OPEC members Saudi Arabia, Qatar and Venezuela to freeze oil production levels if other producers do the same.
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“Immobilizing now at the January level is adequate for the marketplace”, Saudi Arabia’s Ali al-Naimi said.
It comes after talks between Ali Al-Naimi and Russian energy minister Alexander Novak, as well as delegates from Venezuela and Qatar. Meanwhile, he confirmed his readiness to personally participate in the meeting.
The strengthening of the Chinese currency, a rebound in the price of oil and hopes for more central bank stimulus have offered stock markets relief this week. “Iran’s absence from the meeting means overall OPEC output should still rise”.
Oil prices have tumbled about 70% since June 2014, hit by oversupply, sluggish demand and worries about the global economic outlook. “Prices have been trending steadily higher and then we get OPEC deciding to freeze output, which is obviously not a cut, so there’s a bit of disappointment”, said BNY Mellon FX strategist Neil Mellor, in London. It is eager to ramp up its exports now that sanctions related to its nuclear program have been lifted, saying recently it aims to put another 500,000 barrels a day on the market.
The world is now producing 1.5 million barrels a day more than it is consuming, and Iran is promising to add one million barrels per day to supply over the next 12 months.
But although U.S. output has begun to decline and global demand has been robust it has still not been enough to offset booming global production which has led to oil stockpiles rising to record levels.
The ministers said the plan was contingent on other producers joining in – a major sticking point with Iran absent from the talks and determined to raise production.
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The mood began to change in January as oil prices fell below $30 percent barrel. Saudi finances are also suffering badly, running a $98 billion budget deficit last year, which it seeks to trim this year. We don’t want a reduction in supply.
